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George Acs

 
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  • Records Are Meaningless [View article]
    The various strike prices, such as for VMW are provided so that different individuals can find their own "sweet spot." Ultimately, for subscribers, if I recommend trades I try choosing from among the various choices and their various strikes and contracts lengths that are most likely to deliver a suitable risk-reward experience.

    Although VMW is a monthly contract, it could very easily have an experience as we had with Mellanox this past week, as we sold puts. It too had a monthly contract, but after reporting earnings the contract was very cheap to buy back and the position was closed in a single day (we used the $35 contract, sold at $0.90 and repurchased at $0.15).

    It isn't necessarily the length of the contract in the case of these earnings related plays that may have large movements, it's whether or not they have the large movements and sometimes the direction. In the case of Mellanox, despite an early drop to about $41, the contract premium dropped to $0.15. Had I had confidence that the shares would rebound so quickly on an intra-day basis, we could have bought the options back for just $0.05, but the goals was to secure profits and get out of the position quickly.

    The point you make about a bear market is an important one.

    If you take two investors, each of whom have the same portfolio, the one that has covered the positions will fare better in the downturn, even if only by the initial premium. Beyond that, it is a question of how aggressive the covered call writer wants to be in securing additional premiums. For example, are they willing to write contracts for "crumbs" just to get a few additional cents per share for a day or two contract duration, taking the risk that their shares may be assigned at a strike well below cost?

    In such cases the risk- reward may be skewed toward risk, but successful implementation puts the covered investor then even further ahead of his counterpart in a down market.

    A final word is that not all of the weekly suggested stocks end up being recommended to subscribers. Some weeks very few do, usually because of abrupt upward price movements or sometimes cold feet, as with last week's Apple.

    Oh, and the other final word.: Thank you for the kind words.
    Jan 27 04:19 PM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    Is there a world record for the use of superlatives by which Suzy Gharib is measured?
    Jan 27 02:16 PM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    Right now, so many stocks seem to "want to go up" that I look at that as a contrarian sign and a perfect time to have protective covers on existing shares. Obviously, if shares do go up there is opportunity cost involved, but while sentiment is looking for such increases there is concomitant increase in call premiums.
    Jan 27 01:07 PM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    YUM always takes it on the chin and then seems to dust itself off quite nicely. That makes for a good covered option play, especially if you can do it, over and over again.

    I start the week with about 30% cash. The hard part is resisting the urge to spend just for the sake of spending, especially when so many are at or near their highs.

    Beware of those records.
    Jan 27 12:28 PM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    I believe that beard set a meaningful record.

    The market is big enough for lots of reasonable approaches, even yours and mine. Some may be better than others and some may be better suited to one market environment than another. Add some flexibility to whatever approach is used and they all can fare well compared to the averages (even yours and mine).
    Jan 27 11:40 AM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    @Doyle3000

    Yours is a comment worth re-Tweeting, but I can't find the re-Tweet button. It does seem that way sometimes. What's made the last few weeks frustrating is that so many of those assigned shares aren't finding their way back to their previous prices.

    I suspect that you get great joy out of re-purchasing the very same assigned shares when they quickly end up being even cheaper to reclaim. Sadly, that just hasn't been the case recently, but like all good things that are bad for the covered call seller, it too, shall pass.
    Jan 27 11:13 AM | 1 Like Like |Link to Comment
  • Records Are Meaningless [View article]
    Thank you on behalf of the orangutan behind the scenes
    Jan 27 09:44 AM | 2 Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    The Proposition?
    Jan 27 08:10 AM | Likes Like |Link to Comment
  • Records Are Meaningless [View article]
    When specifically looking at human achievement, existing records become motivating targets and push people to higher limits. They serve to advance our capabilities.

    In the markets they may actually serve as "de-motivators" as algorithms and trading programs are likely programmed to react to those records in a defensive mechanism a signal to take profits.
    Jan 27 08:04 AM | 1 Like Like |Link to Comment
  • How To Play The Starbucks Earnings Announcement [View article]
    Sure, I remember Brown and Co. I lived in Boston for 8 years and then worked there for another 8 years, with about 20 years in-between. Weren't they purchased by E*Trade?

    Oh, I should have read the rest of your comment about the E*Trade part, but I forget how to backspace.

    Careful, that game of wondering how things might have been is one with no redeeming value.
    Jan 24 04:49 PM | Likes Like |Link to Comment
  • My Mad Method: Year-End Results 2012 [View article]
    When you consider the statistics regarding the adequacy of people's savings for retirement and the increased life expectancy of the population (as well as the decreasing number of jobs), the need to stretch your assets is, like you suggest, the true measure of performance. It is a hard reality.

    Ultimately, my goal is not to lose money, but I don't care that if in retirement my assets diminish over time, as long as my trading activities reduce the natural diminution of the assets through the need to live. I suppose the alternative is to not outlive your assets, but if you like life that's not an agreeable alternative.
    Jan 23 03:06 PM | Likes Like |Link to Comment
  • How To Play The Starbucks Earnings Announcement [View article]
    My broker loves me. A few more trades this week and they will be able to place an additional "*" in their name.

    Still, remember those days when you had to get a 10% gain on shares just to cover the round trip commission costs of a few hundred shares?
    Jan 23 02:59 PM | Likes Like |Link to Comment
  • How To Play The Starbucks Earnings Announcement [View article]
    Thank you, again.

    I don't typically attempt to intellectualize my process. In general, when making earnings related trades I look at scenarios that encompass anywhere from a 5-25% drop and then see whether I can receive an appropriate premium to warrant the risk. Although SBUX has shown that it is capable of more than a 5% loss upon earnings (July 2012), I used the 5% level. (In the case of Mellanox this morning I used the 25% level and about 10% for FFIV).

    In the instance of SBUX, I worked backward from my goal, which is to attempt either a 1% ROI on a position for a week of holding or beat the S&P 500 by 1% for the period of holding.

    In this case, I gave myself a little bit of slack and accepted a 0.9% rate since this is a 4 day week. If shares do sink below $52.50 and I am not assigned, as many times before, it simply becomes a question of being patient and finding appealing premiums and strikes in order to exit the position with dignity (and profits).
    Jan 23 01:49 PM | Likes Like |Link to Comment
  • My Mad Method: Year-End Results 2012 [View article]
    Having written a number of articles on Apple, also going back to mid-2012, that were decidedly negative, I know the feeling attached to be the target of lots of derisive and emotional rants.

    It's one thing to disagree, but there are certainly ways to do so that aren't very disagreeable. Compared to the Apple folk, your comments are really tame, but compared to the tone in this thread, they aren't and carry a strong air of condescension. While it may actually be appropriate to gloat about the poor run Apple has had and remind your detractors that their emotion got the better of their rational side, there's really no instigatory animus from this article, nor in the thread, other than your own.
    Jan 23 12:04 PM | 3 Likes Like |Link to Comment
  • How To Play The Starbucks Earnings Announcement [View article]
    Thanks for the very kind words. I enjoyed reading your approach (in this and your recent Apple article) to balance the risk-reward equation during earnings season.

    I did add SBUX shares this week at $54.84 and chose to sell $52.50 call options expiring this Friday. Those are in addition to a week old position that have $55 calls written.

    I have a love-hate relationship with Starbucks.Many of It's products conspire to make my heart explode. Their baked goods are as efficient as clogging articles as an out of shape cow. Beyond that, Howard Schultz is probably the least desirable business partner one could imagine, at least GMCR and GRPN probably believe that ( http://seekingalpha.co... ).

    However, as a stock, I think it's akin to an annuity if options are judiciously used as part of the equation. Further, Howard Schultz is one of the very, very few CEOs, along with Steve Jobs, who has proven that you can go back home and re-establish the glory.

    Any strategy, such as the one that you present, that can help you withstand the uncertainty in price movement and direction in the ownership of a high quality company, bears respect.
    Jan 23 11:54 AM | Likes Like |Link to Comment
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